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takes it to his bank--that is,
deposits it for collection. It will reach a Chicago bank in about the
same way that cheques for collection go from one place to another. A
messenger from the Chicago bank will carry the draft to A's office and
present it for payment or for acceptance. If it is a sight draft--that is, a
draft payable when A sees it--he may give cash for it at once and take

the draft as his receipt. If he has not the money convenient he may
write across the face "Accepted, payable at (his) Bank," as in the
illustration. It will then reach his bank and be paid as his personal
cheque would be, and should be entered in his cheque-book. Banks
usually give one day upon sight drafts. The draft will not be presented a
second time, but will be held at the bank until the close of the banking
hours the next day, where A can call to pay if he chooses. Leniency in
the matter of time will depend largely upon B's instructions and the
bank's attitude toward A. If the draft is a time draft--that is, if B gives A
time, a certain number of days, in which to pay it--A, if he wishes to
pay the draft, accepts it. He does this by writing the word accepted with
the date and his signature across the face of the draft. He may make it
payable at his bank as he would a note, if he so desires. He then
returns the draft to the messenger, and if the time is long the draft is
returned to B; if only a few days, the bank holds it for collection.
[Illustration: No. 1. A sight draft.]
[Illustration: No. 2. An accepted ten-day sight draft.]
[Illustration: No. 3. An accepted sight draft.]
[Illustration: No. 4. A time draft.]
An accepted draft is really a promissory note, though it is more often
called an acceptance. When a man pays or accepts a draft he is said to
honour it. In the foregoing illustration A is not obliged either to pay or
to accept the draft. It is not binding upon him any more than a letter
would be. He can refuse payment just as easily and as readily as he
could decline to pay a collector who calls for payment of a bill. Of
course, if a man habitually refuses to honour legitimate drafts it may
injure his credit with banks and business houses.
It is a very common thing to collect distant accounts by means of
commercial drafts. A debtor is more likely to meet--that is, to pay--a
draft than he is to reply to a letter and inclose his cheque. It is really
more convenient, and safer, too, for there is some risk in sending
personal cheques through the mail. There are some houses that make

all their payments by cheques, while there are others which prefer to
have their creditors at a distance draw on them for the amounts due.
If a business man who has been accustomed to honour drafts continues
for a period to dishonour them, the banks through which the drafts pass
naturally conclude that he is unable to meet his liabilities.
Some houses deposit their drafts for collection in their home banks,
while others have a custom of sending them direct to some bank in or
near the place where the debtor resides. If the place is a very small one
the collection is sometimes made through one of the express
companies.
When goods are sold for distinct periods of credit, and it is generally
understood that maturing accounts are subject to sight drafts, there
should be no need of notifying the debtor in advance. Some houses,
however, make a general custom of sending notices ten days in advance,
stating that a draft will be drawn if cheque is not received in the
meantime.
Notice the illustrations. The protest notice at the left of Nos. 1, 2, and 4
is intended for the bank presenting the draft for payment. The reason
for this will be fully explained in our lesson on protested paper. (See
LESSON XIII.) No. 2 shows an accepted draft payable to the order of a
bank in the city upon which it is drawn. No. 1 is payable to the order of
a bank in the city of the drawer. No. 3 is a sight draft payable to the
order of a bank and accepted payable at a bank. No. 4 is a time draft
payable to "ourselves"--that is, the Pennsylvania Steel Company.
Drafts are often discounted at banks before acceptance where the
credit of the drawer is good. In such cases the drafts which are
dishonoured are charged up against the drawer's account.
X. FOREIGN EXCHANGE
It is